Gold prices failed to build on a modest bounce last Friday and began the new week with a weaker tone. Despite a slight recovery from below the $3,000 psychological level, the precious metal continues to face downward pressure. A positive shift in global risk sentiment, fueled by reports of US President Donald Trump’s less stringent reciprocal tariffs, has helped ease concerns about their potential impact on the global economy. This development boosted investor confidence, weighing on gold for the third consecutive day.
Meanwhile, the US Dollar (USD) maintained its recovery from a multi-month low, adding further pressure on gold prices. However, expectations that tariffs could slow US economic activity, potentially prompting the Federal Reserve (Fed) to resume its rate-cutting cycle, have kept USD bulls cautious, limiting the dollar’s upside potential. Geopolitical risks, alongside the Fed’s outlook, could provide support to gold, preventing a significant correction.
Market Update: Risk-On Sentiment Weighs on Gold; USD Stability and Fed Outlook Impact Precious Metal
Reports over the weekend revealed that President Trump is planning to implement a more targeted set of reciprocal tariffs, set to take effect on April 2. This has encouraged investors to shift towards riskier assets, further undermining gold’s appeal as a safe-haven asset.
Ongoing US-Ukrainian peace talks and further meetings with Russian officials could also influence market sentiment. The 30-day pause on Russian strikes against Ukrainian energy facilities, agreed upon earlier this month, has raised hopes for a de-escalation of the conflict.
The US Dollar remained strong near a one-and-a-half-week high reached on Friday, following the Federal Reserve’s less dovish stance and its forecast of two 25-basis-point rate cuts by the end of this year. This has provided additional headwinds for gold, as the non-yielding asset struggles to attract investors in the face of a recovering dollar.
Fed Chair Jerome Powell recently indicated that tariffs are likely to slow economic growth, but market expectations still point to potential rate cuts in June, July, and October. This has placed a cap on the dollar’s gains, offering some support for gold.
Geopolitical Risks Persist, Adding Uncertainty to the Market
Meanwhile, tensions in the Middle East continue to mount. Israel’s airstrikes in Gaza have intensified, including bombing the largest hospital in southern Gaza and killing Hamas leader Ismail Barhoum. Additionally, Iran-backed Houthis in Yemen launched a ballistic missile at Israel, which was intercepted by Israel’s air defense systems. These developments, alongside the US military’s fresh airstrikes in Yemen’s Saada province, have raised concerns over further regional escalation.
As market participants await the release of flash global PMIs for fresh economic insights, all eyes will remain on the US Personal Consumption and Expenditure (PCE) Price Index, due for release on Friday, which could significantly impact market direction.
Gold’s Technical Outlook: $3,000 Remains a Critical Level
From a technical standpoint, gold prices will need to maintain support above the $3,000 mark to avoid a deeper corrective decline. If the price decisively breaks below this level, technical selling could push gold further down, potentially testing the $2,982-$2,978 range. A more substantial decline could extend toward the $2,956-$2,954 region, where previous resistance may now act as support.
On the upside, last week’s all-time high of around $3,057-$3,058 presents an immediate resistance level. If gold sees renewed buying momentum, particularly with the daily Relative Strength Index (RSI) moving away from overbought conditions, it could pave the way for an extension of the bullish trend that has dominated over the past three months.
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